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COUNTRY AUDITS OF REGULATORY POLICIES AND INSTITUTIONS: IMPROVING INTERNATIONAL COMPETITIVENESS
For economies in transition, Jacobs and Associates offers a strategic review of national regulatory practices, based on the approach that we helped the OECD develop for its Member countries.

In many countries, deeper and more sustained regulatory reforms are necessary to improve competitiveness, stimulate private sector growth and investment, reduce poverty, and support market-opening initiatives such as trade agreements. This is a complex and interlinked agenda. Governments are often disappointed by poor results as a result of partial reforms, uncoordinated reforms, reforms based on the wrong priorities, or reforms that do not reflect international best practices.

A careful reform mix is needed, since regulatory reform in a transition country is not only a deregulatory task, but a mix of new regulation, deregulation, and re-regulation, backed up by legal and institutional reforms, to support increasingly competitive markets. Out-dated and inadequate regulatory structures permit abuses and corruption to flourish in emerging markets, undermine investor and consumer confidence, and destroy rather than create economic value.

Jacobs and Associates conducts, in cooperation with the government, and participating donors, a multidisciplinary audit of national regulatory and competition practices in priority policy areas and sectors. The national regulatory audit is a flexible tool applied in many OECD countries. We have now adapted it to the needs of developing countries.

Our Managing Director, Scott Jacobs, is uniquely suited to leading these reviews, since he developed and led the country reviews on regulatory reform when he was head of the regulatory reform program at the Organization for Economic Cooperation and Development (OECD) from 1995-2001. Director Michael Wise has conducted the OECD’s competition policy reviews of 21 countries.

The regulatory audit helps a government take a broad view, develop a strategic assessment of the strengths and weaknesses of a country’s regulatory practices in stimulating business start-ups, investment, market opening, and job creation, and identify a coordinated and concrete reform agenda. A multidisciplinary regulatory audit can help establish priorities across a broad range of reforms, identify reform gaps, identify emerging risks of market failures in the current stage of transition due to regulatory inadequacies, and suggest synergies, policy linkages, and sequencing across policy reforms.

Conducted by a team of foreign and in-country experts, our regulatory audit assesses major regulatory constraints for business entry, investment, and growth, and proposes a practical and integrated reform agenda.
Regulatory problems are not fixed overnight, but our regulatory audit will speed up reform by establishing a medium-term strategic view. Our review is organized around several detailed reports whose contents are agreed with the country under review. Each report assesses the state of the regulatory regime in core policy areas and sectors, compares country practices with international benchmarks, and suggests concrete policy changes. Suggested topics include:
  • Regulatory practices, competitiveness, the performance of the business sector, and poverty reduction places regulatory reform in context with macroeconomic performance and structural policies. Regulatory constraints on growth will be identified. Potential gains from reform in terms of sectoral and macro-economic performance, and contributions to the national poverty reduction strategy, are assessed.
  • The operation of the public administration under the rule of law examines the capacities of state organs – ministries, local governments, judiciary, and congress -- to regulate efficiently, neutrally, and transparently under a credible and secure rule of law.
  • Reducing barriers to business entry, start-ups, investment, and growth assesses difficulties by domestic and foreign businesses in starting-up and expanding, as well as efforts to improve the domestic regulatory and administrative environment through simplifying and reducing regulatory constraints on enterprises. It identifies practical steps to broaden and speed up reforms to simplify the business environment, and examine how regulatory reform can help the country comply with international trade commitments.
  • The role of enterprise and competition policies in market reforms examines current issues about enterprise structure and governance and about competition in the economy. It assesses the adequacy of national competition policy to support business development, including in sectors affected by foreign investment and equitization policies. It assesses how corporate governance practices measure up against international norms.
  • Reports on regulatory reform in priority sectors carries out detailed assessments of regulatory reforms needed in selected sectors to promote investment, efficiency, and better service. These reports will develop step-by-step regulatory strategies to support the introduction of competition and consequent restructuring, including policy development and institution-building. Possible sectors for review include:
    • telecommunications
    • energy (electricity and gas)
    • transport (selected modalities)
    • districution
    • water
    • self-regulation of professional business services
      (such as lawyers, accountants, and engineers)
    • land
  • Conclusions and policy options assesses the pace and direction of change, and the prospects for further reform. It:
    • draws conclusions about the priorities for reform to promote private business development and reduce poverty;
    • identify major discrepancies with international good regulatory practices in the areas reviewed;
    • on the basis of experiences in many developed and developing countries, suggests a package of regulatory reforms for the short to medium term;
    • identifies weaknesses in framework capacities such as quality of public sector procedures and institutions important for the economy-wide development strategy;
    • identifies gaps in regulatory regimes and poor market incentives that increase the risk of costly market and governance failures during the transition to markets.
The final report is followed by focused workshops for relevant parts of the government administration on the assessment, the recommendations, and strategies for implementing the recommendations.
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